Storage Makers Ride Digital Wave

"In this industry, success depends on inventory, pricing and demand," said Tony Trzcinka, portfolio manager at Pax World, which holds approximately 425,000 Seagate shares.

"All of these are moving in the right direction, and supply seems to be in pretty good equilibrium with demand," he says.

Today, Seagate sells most of its products directly to its customers, rather than third-party suppliers. This has kept the company on its toes, making sure its output is finely tuned to customers' needs and keeping inventories at a minimum. Dell (DELL Quote - Cramer on DELL - Stock Picks) and EMC (EMC Quote - Cramer on EMC - Stock Picks), for instance, generally order parts "just in time" for immediate use, rather than stacking them on shelves like resellers.

An Edge Over Asia

Seagate's lean production has also helped the company tame its operating expenses.

The last quarter shined a spotlight on how much better U.S. companies are faring than their Asian rivals. In the last quarter, Seagate earned $188 million in operating income; Western Digital earned $79 million. Hitachi (HIT Quote - Cramer on HIT - Stock Picks), by contrast, reported a $174 million operating loss.

Western Digital's shares, which also got a boost last week from Seagate's revised outlook, were recently trading up 52 cents, over 2%, to $23.88.

Analysts and investors attribute Seagate's rosier earnings forecast to strong demand for personal computers, namely notebooks that use higher-value drives. Seagate is also making inroads with drives used in corporate data centers.

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